Wallet-as-a-Service Will Allow Users to Create Crypto Wallets With Usernames and Passwords
Crypto exchange Coinbase on Wednesday unveiled a wallet-as-a-service product for crypto companies that have struggled to offer customers a familiar, “Web2” experience.
The offering is the latest in a slew of product launches that Coinbase claims will help “onboard the next billion users” to crypto.
Wallets that store digital assets like cryptocurrencies and NFTs are one of crypto’s key innovations, offering users complete control of assets they might otherwise leave with a bank or other centralized institution. But those wallets are also its Achilles heel – unfamiliar to most and sometimes difficult to manage.
They require that users remember, or safely store, a string of words known as a “seed phrase.” If any word is lost, so is access to the wallet, and everything in it. There is no third party that can intervene on a user’s behalf to restore access, as when someone forgets the password to their bank account.
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Coinbase’s wallet-as-a-service will provide crypto companies with technology they can use to create in-app wallets that resemble traditional accounts, “with onboarding as simple as a username and password.”
Evan Weiss, business development lead on Coinbase’s wallet-as-a-service, predicted it would be the most impactful product launched by Coinbase.
“Expecting normal consumers to manage their keys will be a major blocker for bringing in a huge % of the population,” he wrote on Twitter. “My mom can’t even remember her Netflix password. How can I expect her to manage her seed phrase.”
To secure user wallets, Coinbase will use multi-party computation technology (MPC), in which Coinbase and the user share the “key” to the user’s wallet.
“Ultimately, this means that self-custody keys are safe even if a user’s device is compromised,” Coinbase said in a news release. “Furthermore, advanced and automatic backup with MPC guarantees that even if an end user loses access to their device, the key to their web3 wallet is still safe and can be securely stored.”
Users will still be able to export the seed phrase so they can access their assets through a different wallet provider.
Companies already integrating Coinbase’s wallet-as-a-service include Floor, Moonray and Tokenproof.
“Individuals will no longer have to come with knowledge of how the blockchain works in order to interact with the brands they love,” pseudonymous Tokenproof fonder Fonz said in a prepared statement. “This is a huge step towards making the space more approachable and accessible.”